Question

On 7^th May, 2011 Kulkarni of Karvenagar draws a bill on Patwardhan of Latur for Rs 18,000 at 3 months. Patwardhan accepts and returns it to Kulkarni. Kulkarni then sent the bill into his bank for collections.
                    On due date Patwardhan finds himself unable to make payment of the bill and request Kulkarni to renew it. Kulkarni agreed on the condition that Patwardhan should pay Rs 5,000 in cash, and should accept new bill for the balance at 2 months with interest @ 18% p.a. These arrangements were carried through. Before due date Patwardhan declared as insolvent and 20% of the amount due could be recovered from his private estate as first and final dividend.
                    Give journal entries in the books of Kulkarnis. Also prepare Kulkarni’s Accounts in the books of Patwardhan.

Answer 1

                                        Books of Kulkarni
                                           Journal Entry

Date	Particulars	L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
2011 May.07	Bills Receivable A/c         Dr.      To Patwardhan A/c (Bill drawn and accepted)		18,000	18,000
May.07	Bill Sent for Collection A/c  Dr.  To Bills Receivable A/c (Bill sent to bank for collection)		18,000	18,000
Aug.10	Patwardhan                     Dr.   To Bill Sent for Collection A/c  (Bill cancelled)		18,000	18,000
Aug.10	Cash A/c                         Dr.    To Patwardhan A/c (Cash received from Patwardhan)		5,000	5,000
Aug.10	Patwardhan                     Dr.    To Interest A/c (Interest charges due on Rs 13,000 @ 18% for 2 months)		390	390
Aug.10	Bill Receivable Ac            Dr.   To Patwardhan (New bill drawn and accepted with interest of Rs 390)		13,390	13,390
Oct.13	Patwardhan A/c               Dr.     To Bills Receivable A/c (Bill cancelled due to insolvency)		13,390	13,390
Oct.13	Cash/Bank A/c                 Dr. Bad-Debts A/c                 Dr.          To Patwardhan (20% of the amount recovered from his private estate)		2,678 10,712	13,390

                               In the Books of Patwardhan
                                    Kulkarni's Account
Dr.                                                                                                        Cr.

Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J.F.	Amount (Rs.)
2011 May.07	Bills Payable A/c		18,000	2011 May.07	Balance b/d		18,000
Aug.10	Cash A/c		5,000	Aug.10	Bills Payable A/c		18,000
Aug.10	Bills Payable		13,390	Oct.13	Interest A/c		390
Oct.13	Cash A/c		2,678	Oct.13	Bills Payable A/c		13,390
Oct.13	Deficiency		10,712
			49,780				49,780